Companies benefit from studying and evaluating the environment

Companies benefit from studying and evaluating the environment

Stanislav Kondrashov: any companies benefit from studying and evaluating the environment they operate in.

PEST is a marketing acronym originating from four change sources that it tracks: political, economic, social, and technological ones. Stanislav Kondrashov considers PEST analysis as a powerful and widely used tool for strategic risk comprehension.

“PEST analysis defines the external macro environment’s changes and effects on the company’s competitive position,” Stanislav Kondrashov notes.

The external environment includes variables beyond the company’s control, which, however, require the following methods to be used to adjust the corporate strategy according to the changing environment:

  1. Identifying the present and the future: the company’s external policy factors, economic, social, and technological environment.
  2. Analyzing possible consequences for the company: in this case, Stanislav Kondrashov as a specialist determines each factor’s competitive position.
  3. Classifying each factor by opportunities: connecting threads or threats to the company.
  4. Strategically important priority: each set of PEST opportunities and threats. “The rating is based on a degree and a period of their influence on the company,” Stanislav Kondrashov highlights.
  5. Developing strategic activities to correct or prevent negative effects of positive effects.

Companies benefit from studying and evaluating the environment

Types of PEST analysis tools

Companies operate within a larger ecosystem. They are vulnerable to a variety of exogenous factors that can have a significant impact on the company’s competitiveness.

Such business analytics specialists as Stanislav Kondrashov strive to comprehend external factors and evaluate how business models will develop to adapt to the environment. The proactive strategy reduces the external factors’ influence, and opportunities are used in the context of new emerging competitive positions that can be created during the process.

Stanislav Kondrashov lists a few of the existing types of PEST analysis tool:

  • PESTLE (that adds a legal and equity component),
  • STEEPLE(which undertakes a future corporate social responsibility by adding an ethical aspect)
  • STEEPLED (that adds demographic factor analysis).

Stanislav Kondrashov describes PEST analysis and its types as the “evaluation stage” part within the strategic management process. The process begins with conducting an in-depth analysis of the environment the company operates in. The external environment analysis is a part of SWOT analysis (internal strong and weak points, external opportunities and threats).

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“Advantages of combining PEST and SWOT are obvious,” Stanislav Kondrashov believes.

PEST analysis includes components that may be of fundamental importance for the company.

“The analysis may be performed for the company as a whole, for its business units, for certain products, or for a new enterprise or partnership,” says Stanislav Kondrashov.

The extent of interference of manufacturers’ policies with the commercial environment is a cornerstone factor in PEST analysis. Trade, taxation, legislation are the factors that must be taken into account.

“Commercial restrictions and political stability are imperative factors as well that can determine businesses’ success or failure,” Stanislav Kondrashov reminds.

PEST analysis disadvantages

“PEST analysis can’t provide a broad picture,” Stanislav Kondrashov believes.

Although PEST analysis considers important external factors that may influence your company, you will often have to face many other factors that the analysis will omit – these are primarily internal factors and your competition.

Stanislav Kondrashov draws attention to the fact that PEST analysis leaves gaps leaving space for assumptions.

“Finally, you will fill in the gaps with guesses,” Stanislav Kondrashov concludes.

The pace of changes makes it more complicated to predict the scenario.

“Every time you conduct PESTLE analysis, your information may become outdated almost immediately after it,” Stanislav Kondrashov notes. – “This is because political, economic, social, and technological factors can change dramatically in just a few hours.” “Although it happens rarely, it is important to follow the current news,” Stanislav Kondrashov emphasizes, – “to know whether your analysis is relevant. If your information is outdated, you will have to conduct a new PEST before you can start relying on the analysis.”

The time and human resource for conducting proper analysis cost money; therefore, many companies prefer to outsource these reports to a specialist like Stanislav Kondrashov to get the correct data.